ICO Analysis: PayPie

Credit For SMEs

Securing a line of credit serves an important function for businesses. It enables them to perform their day-to-day activities while payments for the products sold get deferred. While it is easy for a large corporation to get credit line from multiple sources, the situation is quite different for smaller organizations. Many economists, policy makers and small business advocacy groups have long explained that small businesses have a harder time obtaining credit than their larger counterparts. When it comes to accessing capital, size definitely matters. Only a third of small business owners are able to get the required credit that their business needs. Not being able to perfectly grasp the default risks is the most important reason for these companies not getting sufficient credit. It is not feasible for banks to evaluate every small business loan application as auditing can be expensive. As a result there is no detailed risk profile of small companies which can result in banks avoiding loans to them.

PayPie Value Proposition

PayPie aims to bring trust and transparency to the financial markets by introducing credit risk assessment based on blockchain accounting catering to small and medium sized enterprises.

PayPie will build a layer connecting blockchain to the existing workflows of an accounting software. For eg. The proposed idea will integrate blockchain with existing accounting softwares like Quickbooks. A hash of all the journal entries and other relevant information from an accounting software is added on the blockchain so that PayPie can use the transparency track record to build a live credit scoring algorithm. All the data stored on the blockchain will be timestamped and immutable. The financial data will be analyzed and a credit score for each business will be calculated based on around 150 metrics for evaluation predetermined by PayPie.

Since the credit score is recalculated dynamically based on the day-to-day operations of the company, banks and creditors will get a live credit score rather than from financial statements released 2-3 months back.

The team believes that their credit assessment will be much better than that done by the banks as it will be based on the transactional data of the companies directly collected from their bookkeeping softwares.

PayPie is also going to create an invoice financing marketplace where lenders can provide liquidity to SMEs based on their credit score as assessed by PayPie.

PayPie’s team are the creators behind SlickPie software which is similar to QuickBooks and has 16000 SMEs using its accounting tools. In the initial phase of implementation, SlickPie users will be given an option to integrate PayPie within their books, which later will be scaled to other accounting software providers. By scaling the PayPie ecosystem to other accounting software providers PayPie aims bring all transactions on one common decentralized ledger.

Token and Crowdraise

The PPP is an ERC-20 token that will be required to access services of the PayPie platform. Each PPP token grants the holder the right to access certain services including the purchase of invoices and access to credit histories of businesses. Lenders will require PPP tokens to access the PayPie platform, and tokens can be used to buy discounted invoices, credit scoring data and real-time financial data of a business.

The presale opens on 8th October while the crowdsale is expected to begin on 15th October. Each PPP token is priced at 0.0011 ETH for the presale. The hardcap for the raise is kept at $27 million USD. If the hardcap is reached in the presale itself then there won’t be any further crowdraise. No bonus structure has been announced as on 6th October, we are actively in touch the team in that regard.

Team

The PayPie team scores well on credibility. Most of the team have previously worked on building SlickPie. SlickPie can be considered a successful project, looking at the active 16 000 SMEs who are using the platform. Having a working product in the form of SlickPie will make it easier to build PayPie since the team will already have a strong base of 16 000 test clients.

CEO Nick Chandi has over 20 years of experience of working in the accounting tech industry. He is the cofounder of SlickPie, and has played an important role in its growth. There are 9 members in the team and 4 advisors. Recently Anthony Di Iorio has joined the team as an advisor and accredited investor. Anthony is one of the cofounders of the Ethereum platform.

Verdict

PayPie all about promises, while there is not enough information or clarity on how these are going to get fulfilled. Risk assessment has been promised to be done with surgical precision. Any person who has worked extensively in auditing and accounting industries will know that there is no such thing as perfect risk assessment especially while using automated techniques. They are integrating blockchain layer above the accounting softwares, PayPie will not be useful if accounting is manipulated at the lower levels. The whitepaper lacks implementation details and leaves you with many questions in mind. Still we have to give credit (no pun intended!) to the team for coming up with such an ambitious project that has the potential to disrupt multiple industries like auditing, credit assessment, accounting etc. The credible set of team and advisors might just figure out a way to implement this project.

Risk

  • Even if the project is implemented, it requires integration and cooperation of multiple entities like creditors (banks) and account software providers (Quickbooks). Convincing each entity about the viability of the project which is based on automated risk assessment is not going to be an easy task. -3
  • It doesn’t make sense for softwares like Quickbooks to collaborate with PayPie while they compete with SlickPie. -1.5
  • Credit assessment involves human intuition and experience. Even large auditing firms like E&Y, PWC have not been able to automate systems and rely heavily on human intervention. -1.5
  • There is no proof of concept, neither are any frameworks given for credit risk analysis. -2

Growth Potential

  • A working product in the form of SlickPie and a credible management team is a big positive for PayPie.+4
  • SMEs do face a lot of difficulties in getting consistent credit lines. Even with the technical difficulties in creation of perfect automated credit rating system, or the issues while integrating PayPie with other accounting softwares, SMEs will find a lot of value in a system like PayPie which rates them and enables access to credit. Users will be eager to lend money to SMEs if the returns are right despite some default risk. There is a good potential in the credit marketplace of PayPie. +4
  • Growth would be very high if the entire implementation and integration is done successfully. There is a strong network effect present in the business. +2

Disposition

We arrive at a score of +2 out of 10 for PayPie. The first development milestone is set for March-April 2018. We suggest to wait till then to see how the development of the project goes ahead.

Investment Details

The presale opens on 8th October 2017 at 13:00 UTC. You can contribute here.

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Author:
Aakash Kawale is a financial analyst based out of Mumbai, India. He is the lead analyst at a Singapore based organization and has extensive experience of analyzing US and Indian equities. Aakash is a strong advocate of the Blockchain technology and has been analyzing cryptocurrencies since 2015.